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Quantera Global Newsletter – May 2021

We are pleased to share the most important national and global developments in tax law that are (closely) related to the transfer pricing world.

Please feel free to contact us if you have any questions.

Send an e-mail to TPnews@quanteraglobal.com or call us at +31 88 221 5800 and we will introduce you to the relevant professional.

Quantera Global news, developments, and blogs:

  • German Bundestag approves significant changes to German Transfer Pricing Law 

On Wednesday 5 May, the German Bundestag will approve a major overhaul of the country’s most important transfer pricing law. German transfer pricing experts Dr. Oliver Treidler and Dr. Klaus Dorner, both part of our worldwide network, have recently written a blog that further elaborates on this overhaul. You can read this blog here.

  • Quantera Global strengthens strategic position in Germany with Klaus Dorner Consulting

Quantera Global is proud to announce its strategic partnership with Klaus Dorner Consulting, a German professional services firm specializing in transfer pricing and economic consulting. Dr. Klaus Dorner, founder and owner of the company, had almost 20 years of Big-Four experience in transfer pricing consultancy before starting his own business.

  • Transfer pricing and Operational Transfer Pricing

Most organizations have transfer pricing documentation in place. Some of those organizations have also reached an agreement of understanding of transfer pricing with local tax authorities. Only a small number of organizations have been able to align these policies with their transfer pricing processes and controls and implement so called operational TP. Operational TP is in fact managing transfer pricing data, governance, and processes, often using (specific) technology. This is also increasingly a subject of investigation by the local tax authorities.

Quantera Global, together with their business partners, can assist organizations set up their operational TP and technology to help organizations make better strategic and business decisions in line with transfer pricing policies and requirements. Please contact your local Quantera Global office/contact person for more information on operational TP and see what is possible for your organization.

  • Quantera Global specialties

In the past month, we performed several challenging and interesting projects worth mentioning, such as:

  • Financial analyses to substantiate at arm’s length interest rates for intercompany loans. Examples of such analyses are loan & bond searches, Credit Default Swap and Loss-Given Default analyses. These analyses are used for setting at arm’s length interest rates on newly issued loans, as well as testing the arm’s length nature of historically set interest rates.
  • Impact analysis of an acquisition and intercompany contract R&D activities on the application of the existing Dutch innovation box ruling and the preparation of an extension of the innovation box ruling.

If you would like to know more about these topics, please feel free to contact us.

  • QG Academy Webinars

In 2020 we started hosting free-of-charge webinars on a variety of Transfer Pricing topics. This became an instant success. Therefore, we will continue these webinars in 2021. We currently have the following webinars scheduled:

  • 26 May: Transfer Pricing developments in the United States
  • 17 June: Transfer Pricing Risk Management: APAs & MAPs

To register for one or more webinars, please visit our website https://www.quanteraglobal.com/group-sessions/ and select the webinar you would like to register for.

Last month we hosted two webinars. In the first webinar, our specialists Richard Slimmen and Maikel Verhoeven discussed how to manage your transfer pricing compliance. In the second webinar, Theo Elshof, together with Nico Kruger from Africa Transfer Pricing, discussed the transfer pricing developments in Africa. You can re-watch these and other webinars by clicking the following link

News around the world:

  • Australia

On 21 April, the Australian Taxation Office issued draft guidance regarding its assessment of the imported hybrid mismatch rules. The rules aim to prevent taxpayers from entering arrangements that lead to such mismatches and can assist them in their compliance efforts.

 

  • Canada

On 19 April, Canada’s Finance Minister presented the 2021-22 Federal Budget. Relevant changes will be made to the country’s transfer pricing rules following the Cameco decision. Canada will also implement limitations on interest deductions and measures against hybrid mismatch arrangements. In the case that an international agreement regarding the taxation of digital enterprises fails, Canada will also implement its own digital service tax.

 

  • Chile

In Chile, the tax court ruled in favour of Avery Dennison in a transfer pricing dispute regarding its intercompany loans and the pricing of the distribution of goods to associated entities. This favourable outcome was partly due to adequate transfer pricing documentation that Avery Dennison had prepared.

 

  • China

In China, guidance was published to help banks deal with their compliance efforts regarding certain cross-border payments. This provides more certainty on what documents taxpayers are expected to deliver when for example making transfer pricing adjustments.

 

  • Costa Rica

Costa Rica’s tax administration has issued guidance that will help taxpayers with implementing APAs.

 

  • Denmark

On 26 April, the Supreme Court ruled in favour of the Danish tax administration that allowed them to make a discretionary assessment, since the transfer pricing documentation that was prepared by Tetra Pak was deemed insufficient.

 

  • Dominican Republic

On 21 April, the Dominican Republic’s tax administration implemented a decree that obliges taxpayers to file a Country-by-Country report, a Master File, and a Local File. The decree has become retroactively effective from the start of 2021.

 

  • India

On 5 April, India made changes to its transfer pricing regulation. Some simplifications were made to the process and the threshold for filing the Country-by-Country report was also increased.

 

  • Ireland

The Irish tax authority has issued several guidelines on a variety of tax topics. The topics that these guidelines cover, tackle hybrid arrangements, guidance on the Dividend Withholding Tax, as well as guidance on the correspondence between capital allowances on intangibles and transfer pricing legislation.

 

  • Italy

The Italian tax authority has issued guidance on the country’s digital service tax. In this guidance, questions that were raised by the public have been answered.

 

  • Maldives

Due to recent changes in the legislation, taxpayers in the Maldives can now agree an APA for up to five years. Guidance was also released to help taxpayers with the procedure of receiving the APA.

  • OECD
  • The OECD recently updated the status regarding the next edition of the Transfer Pricing Guidelines. The next edition is expected to be available in early 2022.
  • Greece and Hungary have become the most recent in a long list of countries that have deposited their ratification instruments for the MLI.
  • Out of a recent peer review report on tax dispute resolution it showed that Ireland and Mexico have difficulties with resolving MAP cases in a timely manner. Nevertheless, the countries, as well as the other six that were part of the review, made improvements to their dispute resolution process.
  • In April, the OECD released the 2021 version overview of the tax policy responses of 66 countries to deal with COVID-19. This is an update from the original report that was released in April last year.

 

  • Peru

The Peruvian tax authority issued guidance which affirms that intercompany transactions that took place in the past, must comply with transfer pricing legislation that was applicable at that time. That means that new legislation, which became effective on 1 January 2019, does not apply to these transactions if they took place before 2019.

 

  • Singapore

A Singaporean court ruled that no deduction of R&D expenses was allowed under a cost-sharing agreement in fiscal years before 2012. Due to a change in legislation, such R&D expenses have become deductible since 2012. For fiscal years prior to that change, the old legislation still applies.

 

  • United Kingdom

In the United Kingdom, the Court of Appeal ruled against the tax authority (‘HMRC’). The central question in this case was whether HMRC was allowed to annul a tax agreement with General Electric (‘GE’) that stems from 2005. HMRC believed that GE had misrepresented the facts, which then led to a tax claim of more than USD 1 billion. However, the Court of Appeal ruled in favour of GE. HMRC can still take this case to the Supreme Court.

 

  • United Nations
  • The UN Committee of Experts on International Cooperation in Tax Matters agreed on 20 April to a new article of the UN Model Tax Treaty. This new article grants additional taxing rights to countries where the customers of automated digital service providers reside.
  • On 27 April, the UN released the 2021 version of the UN Practical Manual on Transfer Pricing for Developing Countries, which has replaced the 2017 version. The new version includes new content on centralized procurement, financial transactions, and country practices.

 

  • United States
  • On 9 April, the IRS issued a statement in which it warns taxpayers still involved in ‘abusive micro captive insurances’ to exit these transactions now and to not claim deductions that result from these arrangements.
  • Recent US proposals that summarize their vision on what Pillars I and II of the OECD BEPS 2.0 projects should look like, have appeared online. This is a strong indication of the momentum that Pillar I and II have gained since President Biden assumed office in January 2021.

 

  • Zambia

Zambia has implemented Country-by-Country Reporting requirements for fiscal years ending on or after 31 December 2021.